Africa’s First MOP/SOP Producer Could Be A Game Changer

 Sunrise Over The Salt Domes Of Dallol

By Cameron Read, December 24, 2012

For nearly four years now Allana has been making increasingly greater progress in bringing their potash project to life, but although it’s proven to be among the most compelling greenfield projects in the world today, the larger investment community has missed the story about to make a very big splash in early 2013 with the release of their Bankable Feasibility Study.

While the 36% IRR project economics and 3.5 year Capex payback hinted at in the PEA are no secret to strategic partners Liberty Metals & Mining and International Finance Corporation, the larger strategic and macro economic picture is the most exciting aspect of the project in my opinion. It bears mention Ethiopia has one of the most ambitious and promising agricultural growth trajectories on the planet today, from government generated sugar/methanol plantation/production (10 facilities in total presently targeted), to hydroelectric dams and the inherent reservoirs for irrigation on a massive scale, it’s clear Meles Zenawi‘s vision of Ethiopia’s transformation to an African agricultural powerhouse is taking shape.

Many other facets of the picture are also being facilitated concurrently. One only has to scratch the surface to discover all the pieces falling into place. Everything from roads and railways, smallholder farmer finance and technical initiatives to Ethiopia’s Commodity Exchange, rural electrification and telecommunication coverage, to increasing health and educational facilities, economic zones and manufacturing and industrial factories, the economic landscapes of Ethiopia and many other nations of Sub-Saharan Africa are growing at world leading rates.

Giving farmers a chance to get a fair price in...

Giving farmers a chance to get a fair price informed by world markets by opening a commodities exchange in Ethopia. (Photo credit: United Nations Development Programme)

It’s within that context Allana Potash finds itself as the near exclusive African potash producer just 2 years from production, coinciding in a very timely way it’s ramp up in production to Africa’s growing internal potash requirements. Although Allana also has an operational Opex and geographical advantage to cartel potash suppliers by virtue of Djibouti’s proximity to Indian and other Asian markets, it has a potential lock as the primary Sub-Saharan African MOP and SOP supplier, a market which holds great promise as the coming decade unfolds.

Potash output4

Potash output4 (Photo credit: Wikipedia)

With the release of Allana’s BFS in January 2013, subsequent “soft” commitments exceeding $600 million being solidified and offtake agreements and equity funding in place, the project construction begins in earnest. The market has discounted the share price since speculators jumped ship with their profits once the initial resource estimate was released, but it’s been full steam ahead all the way on nothing but strong news, and the long term holders will be rewarded finally in the coming months. The market has made this company a gift at these prices currently, but that promises to change dramatically come the new year in my opinion. Good luck to all involved, and most importantly to the people of Ethiopia, who shall benefit the greatest from the potash resource, whether applied to their soil or sold to others in the end, since it is theirs, after all.

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